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#HiddenContractKE campaign

The Kenya Government has signed over 40 contracts with oil companies to explore in the country both onshore and offshore. Of these, contracts very few have been made public. The platform is pushing for transparency in contracting in light of a government push to sign new contracts.

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In March the membership of the platform wrote to the Cabinet Secretaries Charles Keter and Dan Kazungu asking for disclosure of all petroleum contracts and mining contracts/leases signed by the Government of Kenya and companies for exploration and development in the extractive sector.

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A key pillar to the effective realisation of Kenya’s Oil and Gas resources is good contracts. However, the lack of disclosure of Kenya’s Petroleum contracts denies a key oversight mechanism. It is critical that existing contracts are reviewed and also ensure that terms contained therein are being followed. Similarly, with analysis showing that Kenya would get a better deal from the new petroleum bill as opposed to the existing law, a moratorium on the issuance of new licenses would safeguard future revenues.

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Letter to the Ministry of Mining Kenya

Letter to the Ministry of Petroleum Kenya contract request

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The long-term prospects for Turkana oil continue to improve. Tullow and Africa Oil report that the volume of oil available in the South Lokichar Basin is even higher than previously assumed.1 The barrier to the exploitation of Turkana oil continues to be oil export infrastructure. The only viable approach to the full development of the oil fields is a pipeline to the coast.

Available evidence suggests that there is enough oil in the South Lokichar Basin to support an independent pipeline. The Government has recently put out a tender for an engineering plan (known as a Front End Engineering and Design or FEED) and an environmental and social impact assessment for the pipeline.2 An independent pipeline however will almost certainly result in additional delays. Tullow now reports that the earliest possible date for first exports through a pipeline is 2021. If depressed oil prices continue, further delays can be expected.

Faced with a growing time gap before pipeline- based exports, the Kenyan government is pressing for an interim transportation solution to kick-start exports. Starting in late 2015, reports surfaced of a plan to export Turkana crude oil by truck to Eldoret and then by train to the retrofitted refinery in Mombasa.

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Turkana oil

This report seeks to provide an estimate of the scale and timing of possible Kenya national government and Turkana county government revenues from Turkana oil. The series of successful oil exploration wells in the South Lokichar basin has generated high expectations for the country as a whole and for the historically marginalized Turkana region. Published revenue projections suggest that peak annual receipts to the Government of Kenya could range from USD 800 million to as much as USD 3 billion.1 Provisions in the 2015 draft Petroleum Bill for transfers of government oil revenue to Counties (20%) and Communities (5%) generate additional interest.

Revenues from Turkana Oil April 2016

 

The Petroleum (Exploration, Development and Production) Bill, 2015 was published and read for a First Time on 19th August, 2015 and thereafter committed to the departmental Committee on Energy, Communication and Information for consideration pursuant to Standing Order 127.

REPORT ON PETROLEUM BILL, 2015

Background

There is no doubt that the discovery of crude oil in commercial quantities creates significant potential for a country to transform its  economy. For some countries oil has been a blessing, but for others, it has weakened state institutions, collapsed the traditional sectors of
agriculture and manufacturing, caused violent conflicts and increased poverty levels. With the discovery of oil in 2012, Kenya is about to join the league of oil-producing countries.

However, what is not certain is whether Kenya will join the elite on the continent who have managed to use their natural resources to ensure inclusive and sustainable growth. The issues confronting resource rich countries are quite complex and require a systematic, comprehensive and inclusive approach in designing the frameworks that address those complex issues. The frameworks include the appropriate policies, legislation, regulations and institutions for the sector.

The development of these frameworks comes with its attendant problems particularly for frontier countries like Kenya with no previous experience in oil production. There is therefore a temptation to adopt frameworks from other countries despite the contextual differences
between countries. The Government of Kenya has a responsibility to adopt frameworks that are consistent with the prevailing social, economic, political and cultural circumstances in the country so as to facilitate the development of the oil and gas industry.

As Kenya begins the journey of becoming an oil producing country, civil society organisations and citizens alike have expressed worry at the haste with which the country is developing its frameworks for the sector. There is also unease about the low level of public consultations, the potential for vested interest to be rooted in the frameworks, and the potential for oil to divide the people. Concerns have also been raised about the threat that oil poses to the environment, livelihoods of communities and security.

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